JP Morgan says recent Indian tax and policy changes are making equity investing more attractive for households, even as overall market returns have been subdued. In its view, reforms that affect how returns from different financial products are taxed have shifted the relative advantage toward equities. The brokerage points to long-term capital gains on equity being taxed at 12.5%, and to changes that have reduced the tax efficiency of some alternatives, including certain debt mutual funds and some insurance products. It also cites the removal of indexation benefits for certain investments and changes in how some insurance proceeds are taxed as contributing factors.
The report further highlights the role of Systematic Investment Plans (SIPs) in supporting ongoing money flows into equity markets. Despite limited benchmark index performance over the past two years, investors continue regular SIP contributions, which JP Morgan interprets as evidence of a more disciplined, long-term approach to investing.
While maintaining a constructive stance on domestic equity inflows, the brokerage expresses caution on India’s information technology sector, saying disruption and uncertainty could prolong slower growth and delay a strong rebound in IT demand.
